Renting a car in Iceland requires massive due diligence by the renter. Check out the TripAdvisor boards for scare stories, but it is important to thoroughly document the condition of the car, inside and out, including the tires, before you leave the lot. Do it again when you drop off, unless they are viewing the car when you return it.

Pictures, video, either will do. But problems with pre-existing damage and tiny scratches are not uncommon there.